Residential delinquencies and foreclosures on all mortgages fell in the second quarter on a sequential basis for the period ending June 30, but the elevated level of late payments has the industry grappling with $963 billion worth of troubled loans.

The Mortgage Bankers Associated (MBA) reported Thursday morning that the national delinquency rate fell to 9.85% at June 30 compared to 10.06% at March 31. A year ago delinquencies stood at 9.24%.

Foreclosures started during the quarter fell to 1.11% of outstanding loans, an improvement over the March 31 reading (1.23%) as well as the year ago figure of 1.36%.

National Mortgage News estimates that consumers owed $9.85 trillion on their home mortgages at June 30. Based on the MBA's delinquency number, that means $963 billion of all home mortgages are in some stage of delinquency, be it 30-, 60-, or 90-days late or in foreclosure.

The improvement in late payments is a positive sign for mortgage bankers and MBS investors, but lenders continue to be concerned about high unemployment and future layoffs at U.S. firms.
Loan modifications are being credited with the improvement in the delinquency figures, but a new report from CoreLogic found that 11 million — or 23% of all residential properties with a mortgage on it — had negative equity at June 30.

According to the MBA, subprime delinquencies account for the worst reading among different mortgage types with 27.02% of outstanding loans in arrears. Roughly 7.10% of prime loans were late at June 30.

But there was some bad news in the report concerning Federal Housing Administration-backed mortgages: the percentage of loans in arrears rose to 13.29% at June 30, up from 13.15% at March 31. However, a year ago the FHA delinquency rate was higher a 14.42%.

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